Volkswagen AG is selling Europe's first corporate bonds of thenew year as company borrowing costs relative to government debtfell to the lowest since April 2008.

The German carmaker was the region's biggest issuer of debt lastyear, selling 9.8 billion euros ($12.8 billion) of bonds, and ithas 6.5 billion euros of notes maturing this year, according todata compiled by Bloomberg.

The relative yield on European corporate bonds over governmentdebt has fallen to 137 basis points, according to Bank of AmericaMerrill Lynch's Euro Corporate index, compared with 301 basispoints at the start of 2012. The new issuance market has beendominated by banks so far this year and UniCredit SpA was in themarket today with a 1 billion-euro covered bond deal.

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